It may end up costing jobs in Slave Lake
As expected, the U.S. Government has slapped a duty on Canadian softwood lumber being imported into that country. The move, announced last week, directly affects local producer Vanderwell Contractors, whose product going across the border now will cost about 20 per cent more than it did a couple of weeks ago.
It’s a bit early to say exactly what the impact will be at the Vanderwell mill, but it could well result in a reduction of output, which would likely mean layoffs.
“It is a huge concern to us as a company,” says general manager Ken Vanderwell. “Any extra costs couldn’t come at a worse time.”
The industry has been through this sort of thing at least a couple of times before. Vanderwell says the difference this time is “the cost structure is a lot different.”
Of the industry generally, Brock Mulligan of the Alberta Forest Products Assn. says, “I think it’s fair to say producers have done everything they can to prepare for it. But there’s only so much they can do.”
One thing companies – individually and collectively – have been doing in recent years is developing new markets. This means China, principally. Mulligan says there has been some success there, but the collapse of the Russian ruble spells bad news on that front as well. Good news for Russian lumber exporters; bad news for their Canadian competitors.
The new tariffs are the result of the U.S. Commerce Department accepting the contention of the U.S. lumber industry lobby that Canadian producers don’t pay high enough ‘stumpage,’ and therefore have an unfair advantage. This argument has been rejected again and again by international trade tribunals, says Mulligan. The case will be brought before such panels again, but “it’s a multi-year process,” he says.
In the meantime, U.S. lumber producers will enjoy a short-term advantage in the U.S. market. What will happen down there, Mulligan predicts, is that they (U.S. producers) will “artificially raise prices,” which is “going to hurt consumers in the U.S. big-time.”
Another impact will be that the barrier to Canadian lumber will make it easier for lumber producers from other parts of the world to sell their products in the States.
Finally, the higher price of lumber will likely result in other materials (besides wood) being used in construction.
“We are disappointed that the United States has chosen this course of action,” says AFPA President Paul Whittaker. “Alberta’s timber pricing practices have repeatedly been found to be fair and competitive by international tribunals. We plan to work closely with the Government of Canada and the Government of Alberta to vigorously challenge these tariffs and fight for Alberta jobs that depend on a healthy, sustainable forest sector. All options, including litigation, are on the table. We expect to be fully vindicated.”
Maybe so, but it won’t happen any time soon.
“For us, long-term, we’ll have to take a look at shifts,” says Vanderwell.
During the last economic downturn, the mill went down to a single shift from three. Since then it has been able to ramp back up to a three-shift rotation and full production. Vanderwell says “our employee family is important to us,” and they’d hate to have to lay people off.
Speaking of the possibility of new markets, there are some encouraging things happening there, Vanderwell says, mentioning Mexico as one possibility.
“The Alberta Government has been good in that regard,” he adds, “shoring up trade offices.” But other markets can’t really replace the U.S., as the biggest and closest market to Canada.
“And they need the wood,” Vanderwell says.